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2022 Mortgage Rate Predictions: Is This the Year They Finally Hit 4%?

2022

Well, just like that it’s December again, which means it’s time for the 2022 mortgage rate predictions.

This past year was filled with ups and downs (literally) when it came to mortgage rates, with plenty of surprises and unexpected turns along the way.

I expect 2022 to be no different, seeing that COVID is still very much an unresolved issue.

At the same time, the Fed has pumped the brakes on its purchases of mortgage-backed securities, while also signaling an end to its easy money, low rate days.

So perhaps 2022 will be an ongoing tug-o-war between the Fed and COVID when it comes to the direction of rates. This could mean periods of low rates and not-as-low rates.

MBA 2022 Mortgage Rate Predictions

First quarter 2022: 3.3%
Second quarter 2022: 3.5%
Third quarter 2022: 3.7%
Fourth quarter 2022: 4.0%

First up is the Mortgage Bankers Association (MBA) and their monthly Mortgage Finance Forecast from late November.

They predict a 30-year fixed mortgage at 3.3% in the first quarter of 2022, which isn’t far off from today’s levels, depending on the mortgage lender in question.

It then rises 20 basis points to 3.5% in the second quarter of 2022, and another 20 bps to 3.7% in the third quarter.

The shocker is their call for a 4% 30-year fixed mortgage rate by the fourth quarter of 2022. That’s bold, though not out of the realm of possibilities.

They see rates going even higher from there in 2023, but perhaps plateauing a bit close to 4% for much of the year.

Fannie Mae 2022 Mortgage Rate Forecast

First quarter 2022: 3.2%
Second quarter 2022: 3.3%
Third quarter 2022: 3.3%
Fourth quarter 2022: 3.4%

Next up is Fannie Mae, which releases a monthly Housing Forecast that contains mortgage rate predictions through 2023.

They are playing things a lot safer than the MBA and simply going with a 30-year fixed that barely budges throughout the next 12 months.

We’re talking 3.2% to start off 2022, 3.3% for the second and third quarter, and just 3.4% at the end of the year.

And they don’t expect rates to go much higher in 2023 either, currently forecasting a rate of just 3.5% at that time.

Fannie Mae also polls consumers on their mortgage rate expectations over the next 12 months, and let’s just say they aren’t very optimistic.

In its latest release, (December 7th, 2021), just five percent of respondents said they believe mortgage rates will go down, while 58% think mortgage rates will go up.

Meanwhile, 32% expect mortgage rates to stay the same over this time period. So you’re in the minority if you see rates moving lower in 2022.

Freddie Mac 2022 Mortgage Rate Predictions

First quarter 2022: 3.4%
Second quarter 2022: 3.5%
Third quarter 2022: 3.6%
Fourth quarter 2022: 3.7%

Meanwhile, Freddie Mac isn’t too hopeful themselves when it comes to the direction of rates.

They expect the 30-year fixed to rise to 3.4% in the first quarter of 2022, before inching up 10 basis points each quarter to end the year around 3.7%.

While still quite low historically, it won’t be welcome news to prospective home buyers grappling with affordability issues, or existing owners looking to tap home equity.

The caveat is their forecast was last updated at the end of September, so until I get their next release, this is all we have to go on.

There’s a chance they may rein it in a bit and shift their estimates down, though I doubt they’d move more than say 10 basis points lower for each quarter. But we’ll see.

NAR 2022 Mortgage Rate Outlook

First quarter 2022: 3.3%
Second quarter 2022: 3.5%
Third quarter 2022: 3.6%
Fourth quarter 2022: 3.7%

Next up we’ve got our friends at the National Association of Realtors (NAR), which provide estimates in their monthly U.S. Economic Outlook.

The numbers above are from their November 2021 edition, and aren’t much different than what Freddie Mac is predicting.

In fact, other than the first quarter being a slightly lower 3.3%, their estimates are exactly the same.

They appear to be playing things more safely than in the past when they’d often call the end on the low mortgage rates.

I’m surprised they didn’t take the opportunity to call a year-end 4% 30-year fixed…

CoreLogic Mortgage Rate Forecast

While CoreLogic doesn’t break rates down by quarter, they do expect “mortgage rates to average about one-half of a percentage point higher in 2022 than they were in 2021, or about 3.4%.”

This is pretty close to the estimates from Fannie Mae, and the result of the Federal Reserve’s tapering to support its monetary policy.

Despite these expected higher interest rates, they believe home sales will rise to their highest levels since 2006, around the time the housing market began to top.

Ominous sign or not, it means mortgage lenders should stay relatively busy with home purchase loans, even if mortgage refinancing slows a lot.

The Truth’s 2022 Mortgage Rate Predictions

First quarter 2022: 3.0%
Second quarter 2022: 3.25%
Third quarter 2022: 3.375%
Fourth quarter 2022: 3.5%

Lastly, I’ll throw my hat in the ring and provide my predictions for the upcoming new year.

As I always say, there will be opportunities throughout the year – that’s just the nature of mortgage rates. They ebb and flow, rise and fall, just like anything else.

Of course, timing them is just as hard as everything else too.

Depending on the time of year (when are mortgage rates lowest), the environment could be favorable or not that desirable.

Still, I don’t see a ton of upside risk to rates given we’re still dealing with the COVID-19 pandemic.

A lot of unknowns remain, especially navigating this winter, which is always a trickier time of the year when it comes to any illnesses.

Once we get to 2022, it’ll hopefully be a bit clearer. But I expect new variants to surface in 2022, which could make it difficult for the Fed to move their own borrowing rates significantly higher.

At the same time, I don’t necessarily see mortgage rates falling much or hitting new all-time lows in 2022. It’s certainly possible though and I won’t rule it out.

But if I had to pick a direction, I’d say up, though only slightly. So if we start the year at 3%, only 3.5% by the end of the year, which isn’t bad at all.

A lot of homeowners already have super low 30-year fixed mortgage rates that they probably won’t mess with.

The only exception is those who wish to tap their equity via a cash out refinance. So rates will mostly only matter to new home buyers and these folks.

But if they stay low enough (or dare I say go even lower), plenty of existing homeowners with low-rate mortgages may rush to cash out some of that precious home equity.

This could save the mortgage industry, which is expected to see quite a bit of slowing in 2022 after some really big years.

Be sure to check all my 2022 real estate predictions for more on the housing market, rates, and trends.

(photo: Marco Verch, CC 2.0)

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